Assessing Regulatory Impact on Online Brokers

Goldman Sachs downgrades FUTU to Neutral and maintains a Sell on TIGR following new CSRC regulations that mandate a two-year cleanup of non-compliant mainland Chinese accounts. The report forecasts significant earnings hits due to regulatory fines and the loss of mainland AUM revenue contribution.

Key Takeaways

• 1.The CSRC has introduced a strict two-year 'rectification' period for illegal cross-border securities activities, effectively banning new buy transactions for existing mainland Chinese clients.
• 2.Online brokers FUTU and TIGR face significant regulatory penalties of Rmb 1.85bn and Rmb 412mn respectively.
• 3.Goldman Sachs has downgraded FUTU to Neutral and maintained a Sell rating on TIGR, significantly lowering 2026 profit forecasts and target price-to-earnings multiples.

Table of Contents

• What's Been Announced
• Immediate Impact of Announcement
• Known and Unknown Variables; What Can Be Incorporated Into Earnings
• Forward Earnings Path And Drivers For The Next 12 Months
• Adjustment to Client Base Outlook
• Challenges in Acquiring New Clients
• Earnings Outlook
• Valuation Anchored to Regulatory Action and Capital Market Volatility
• What We Will Be Monitoring; Bull/Base/Bear Case Scenarios
• Price Target Risks and Methodology - FUTU Holdings
• Price Target Risks and Methodology - UP Fintech Holding

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